Volatility in the corporate markets could not keep the asset-backed pipeline closed last week, as about $9 billion in ABS issuance was brought to term.
"Given all the volatility we've had in the corporate sector, where essentially s we had trouble in the equity markets yesterday, saw a dramatic sell off in corporates ... We have seen very little softening, certainly in the triple-A level in asset-backeds," said an ABS trader.
After two weeks with little issuance seen, some well-known market players came back into the market.
Early in the week, a $1 billion transaction from American Honda Financial Corp. was quickly absorbed into the market, pricing tighter than guidance. "It pretty much blew out right off the bat," said Alex Roever, head of asset-backed research at Banc One Capital Markets.
"The Honda deal was priced tighter than guidance on everything except the three-year, it seemed to go very well; it was multiple times oversubscribed," added another ABS trader.
Also in the market was a $2.7 billion fixed/floating rate auto deal from Ford Motor Credit Co. that demonstrated the demand for floating over fixed-rate paper.
"The floating-rate tranches got done inside of price guidance by a basis point, and everything fixed got done a basis point wide of the wide end of talk," said an ABS trader adding that the pricing is "kind of indicative of the stronger tone of the floating-rate market" even though a good amount of fixed-rate deals entered the market.
Metris Companies issued $500 million in floating-rate credit-card notes, while Capital One priced $1.2 billion in floating-rate credit card notes. A $232 million truck-receivables deal from Navistar Financial Corp. also priced last week.
"After a couple of very sloppy weeks in the corporate market, it's nice to see these deals done in line with or better than price guidance," said an ABS trader. "It's a good indicator that our market is a little more isolated than the corporate market is from all that volatility that's going on right now."
The secondary market was rather light. A $180 million bid list was seen in the market, with only $100 million of that being sold. Market sources indicate that the deal was aggressively traded, and the dealer only wanted to sell $100 million. Elsewhere in the secondary market, spreads remained relatively stable day to day, as most of the demand was seen in the primary market.
"Going into [last] week, we were a little concerned with the spread widening [the week before] in corporates, what was going to happen with spreads in asset-backeds," Roever said. "And they seemed to have held in pretty well."
Going forward, a $882.7 million home-equity offering from Conseco Finance is scheduled to come to market this week. Premarketing has the $285 million triple-A tranche pricing at 35 basis points over the EDSF.
Also, a $500 million home-equity deal from Alliance Funding Corp. is rumored to be in the market shortly, though there were no definite plans at press time.
"I think that issuers are still probably not going to tip their hand too early, because the market could get funny and they might not want to come to market with a deal until things settle down," Roever said. "If we keep up with this pace for a while, it could be a pretty good month."